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Most businesses focus on the hourly rate. But the real cost of putting a worker on site involves superannuation, workers compensation, payroll tax, leave entitlements, insurance, compliance, and legal risk. Here is what you are actually paying for — and why it matters.
If your labour hire provider’s charge rate looks too good to be true, it probably is.
When you hire a worker — whether directly or through a labour hire provider — the base pay rate is only the beginning. For every dollar you pay in wages, there is a significant layer of mandatory on-costs, insurance, compliance obligations, and administrative overhead that must be factored in.
Most employers understand the basics: superannuation is a legal requirement, and workers compensation insurance is mandatory. But few appreciate the full picture. When you account for every statutory obligation, the true cost of employing a worker in Australia is typically 25 to 35 percent above the base hourly rate— and that is before you factor in recruitment, administration, and compliance management.
For labour hire, the equation is even more complex. A compliant labour hire provider is not simply adding a margin on top of wages. They are absorbing a significant and unavoidable cost base that protects you, the host employer, from legal, financial, and operational risk.
Here is a transparent breakdown of the on-costs and obligations that sit behind every labour hire charge rate in Australia.
As of 1 July 2025, the Superannuation Guarantee (SG) rate is 12% of ordinary time earnings. This is a mandatory employer contribution for all eligible workers, including labour hire employees. It applies to every hour worked at normal time, time-and-a-half, and double time.
From 1 July 2026, payday superwill take effect — meaning employers must pay super at the same time as wages, not quarterly. Non-compliant providers who have been deferring or underpaying super will face immediate cash flow pressure and penalties from the ATO.
What to watch for
Some non-compliant operators pay super late, underpay it, or avoid it altogether for certain workers. The ATO is actively pursuing these providers, and host employers can be held liable for unpaid super in certain circumstances under the Superannuation Guarantee Charge framework.
Workers compensation premiums are calculated based on industry classification, claims history, and the nature of work being performed. Rates vary dramatically:
For a construction labour hire provider supplying workers across multiple trades and risk categories, workers compensation represents one of the single largest on-costs — often exceeding superannuation in high-risk classifications.
What to watch for
Unscrupulous providers sometimes misclassify workers into lower-risk categories to reduce premiums. This is insurance fraud, and if a worker is injured on your site under a misclassified policy, the host employer may face significant exposure.
Payroll tax is a state-based tax levied on wages once a business exceeds the relevant threshold. Rates and thresholds differ by state:
| State | Rate | Annual Threshold |
|---|---|---|
| NSW | 5.45% | $1,200,000 |
| QLD | 4.75% | $1,300,000 |
| VIC | 4.85% | $700,000 |
| WA | 5.50% | $850,000 |
| SA | 4.95% | $1,500,000 |
| ACT | 6.85% | $2,000,000 |
Any established labour hire company with a meaningful workforce will exceed these thresholds. Payroll tax is an unavoidable cost of doing business at scale.
What to watch for
Some operators structure their businesses to artificially stay below payroll tax thresholds — using multiple ABNs, sham contracting, or other arrangements. Revenue authorities in every state are actively auditing these structures, and the penalties are severe.
Permanent employees and long-term casual workers accrue leave entitlements that represent real financial liabilities:
For labour hire, these costs are built into the charge rate for permanent placements and factored into casual loading for casual workers (typically 25% above the base rate).
Compliant labour hire providers carry trade credit insurance to protect against client non-payment. This typically adds 2 to 5%to the cost base, depending on the provider’s client portfolio and risk profile. It is one of the costs clients never see — but it protects the provider’s ability to pay workers on time, even when a client fails to pay their invoices.
Running compliant payroll is not free. Between payroll software, payroll staff, timesheet management, award interpretation, tax withholding, PAYG reporting, single-touch payroll compliance, and superannuation administration, payroll processing costs typically add 3 to 7% to the hourly cost base.
This includes the cost of getting it right. Award interpretation in construction alone involves dozens of classifications (CW1 through CW8 and above), shift penalties, travel allowances, meal allowances, site-specific allowances, and overtime calculations that change depending on the day of the week and the number of hours worked.
Before a worker sets foot on your site, a compliant provider has invested in:
These costs are embedded in the charge rate and represent a significant investment in workforce quality and site safety.
To illustrate the gap between the hourly pay rate and the true cost of employment, consider a standard construction labourer classified as CW1b under the Building and Construction General On-site Award in NSW:
| Cost Component | Per Hour (Normal Time) |
|---|---|
| Base pay rate | $35.00 |
| Superannuation (12%) | $4.20 |
| Workers compensation (~5.2%) | $1.82 |
| Payroll tax (5.45%) | $1.91 |
| QBE credit insurance | $1.73 |
| Payroll processing | $1.38 |
| Travel allowance (where applicable) | $2.74 |
| Total employment cost | $48.78 |
| On-cost percentage | ~39.4% above base |
The charge rate then needs to include a margin to cover business overheads (office, staff, technology, insurance, compliance infrastructure) and provide a sustainable profit. A typical compliant charge rate for this classification would be $55 to $56.50 per hour — of which the provider’s actual margin is often only 11 to 14% after all on-costs are accounted for.
When a competitor quotes $42 per hour for the same worker, ask yourself: what are they not paying?
The Australian construction industry has a well-documented problem with non-compliant labour hire operators. These businesses — often referred to as “cowboys” — compete on price by systematically underpaying or avoiding their legal obligations.
Common practices include:
These are not minor administrative oversights. They are deliberate strategies to undercut compliant providers on price — and the risks flow directly to you, the host employer.
Labour hire licensing is now mandatory in four Australian states and territories, with penalties that should make any business pause before engaging an unlicensed provider.
NSW and WA do not currently have specific labour hire licensing schemes, but both states regulate employment practices through other legislation, and a national licensing scheme has been proposed at the federal level.
The trend is clear: regulation is tightening, not loosening. Every year, the compliance bar rises. Businesses that engage unlicensed or non-compliant providers face escalating legal and financial exposure.
Australia’s approach to modern slavery has fundamentally shifted. What was once treated as a reporting and transparency exercise now carries serious criminal consequences.
Under the Commonwealth Criminal Code, the following offences carry severe penalties:
| Offence | Maximum Penalty |
|---|---|
| Slavery | 25 years imprisonment |
| Child trafficking | 25 years imprisonment |
| People trafficking (aggravated) | 20 years imprisonment |
| Sexual servitude (aggravated) | 20 years imprisonment |
| People trafficking (base) | 12 years imprisonment |
| Forced marriage (aggravated) | 9 years imprisonment |
| Forced labour | Up to 12 years imprisonment |
| Debt bondage | 4 years imprisonment |
These are not theoretical penalties. The Australian Federal Police and Commonwealth Director of Public Prosecutions actively investigate and prosecute these offences.
The Modern Slavery Act requires entities with annual consolidated revenue of $100 million or more to submit annual Modern Slavery Statements detailing the risks of modern slavery in their operations and supply chains.
Following the 2024 statutory review, the Australian Government has agreed in principle to introduce:
Labour hire sits at the intersection of supply chain risk and direct employment. When a host employer engages a labour hire provider that:
...the host employer’s supply chain is directly implicated. Under the Migration Amendment Act, it is now illegal for employers to pressure temporary visa holders to breach work-related visa conditions or accept exploitative arrangements, and wage theft has been criminalised at the federal level.
The message is unambiguous: ignorance is not a defence. If your labour hire provider is cutting costs through worker exploitation, you share the legal risk.
Working with a fully compliant labour hire provider like Harrison Barratt Groupis not a cost — it is insurance against legal, financial, and reputational risk.
Here is what you get when you partner with HBG:
When you see a labour hire charge rate, you are not paying a worker’s hourly rate plus a greedy margin. You are paying for:
A compliant provider’s margin after all on-costs is typically 6 to 15%. That is the cost of having a professionally managed, legally compliant, fully insured workforce on your site — without any of the administrative burden or legal risk sitting with you.
Harrison Barratt Groupis a fully compliant, nationally licensed labour hire and recruitment provider. We do not compete on shortcuts — we compete on service, reliability, and transparency.
If you want to understand the true cost of your workforce, or if you want the confidence of knowing every statutory obligation is being met, talk to our team.